Do you have a business that always on the ropes when it comes to financial viability? Do you feel like you are barely making it every month? Well, your business may not be financially fit. Even if you find yourself in these situations today, you do not have to worry as you can turn your business around and make it financially fit again.
Start by knowing your overhead costs
Most business owners focus on their products and profits but a majority do not take into account the costs that could be impacting their profits. These costs are known as overhead costs. These costs include administrative costs, rent, production costs and other out of the pocket expenses that a business must take care of.
Knowing what these expenses are and how much they are could help shed a light on where your money is going and where it is being wasted. Understanding your overhead costs might help you reduce then and make your business a lot healthier.
Monitor your cash flow
Monitoring cash flow is vital for the success of any business. Monitoring your cash flow means keeping an eye on how much money is coming in, where it is coming from and where it is going. Knowing what is coming in versus what is going out will help you adjust your targets to know how much you need to bring in to remain financially viable.
A healthy cash flow also ensures your business does not have any problems in case you would like to expand, save up for assets or hire new employees.
Check your numbers monthly
If you find your business struggling to stay afloat, it is always a good idea to check your numbers regularly, preferably monthly. Waiting until the end of the financial year to do so might reveal issues that are too far gone to be corrected. Working on your numbers monthly ensures that you can catch any financial issues early and correct them. It also helps with setting goals for your business and knowing if the steps you have taken to improve the fitness of your business are working or not.
Always know your ratios
Most business owners do not know what rations are. Ratios are a way of measuring your assets against your liabilities. For a financially fit business, its assets should outweigh its liabilities. To get your ratios, take your assets in a certain category and divide them by your liabilities in the same category. For example, a business should have a ratio of at least 2:1. This means that for every dollar in liabilities, you should have two dollars in assets. Tracking your rations monthly will help you see if your business is moving in the right direction.